By Austin Duerfeldt
Tying paper receipts to Quicken or QuickBooks transactions
Everyone knows the feeling. Boxes upon boxes fill up your garage, closet, attic, and about every other conceivable location, storing all those precious receipts and invoices. For the IRS you are looking at keeping documents for three years from the date you filed the original return or even as many as seven years for certain claims of worthless securities or bad debt. Storing all those paper documents can be a burden and depending on the system, a nightmare to find later on.
What if I told you there is another way? A way to meet all the expectations of the IRS, save precious storage space in your home, and make life simple when reviewing transactions for both you and your accountant. The answer is digital records, scanned copies of the supporting document. I’ve done it, and it’s easier than you think.
The first question everyone asks is: “Is it legal to use scanned documents?” This is a valid point. The IRS has a Revenue Proclamation that addresses this exact issue. Revenue Proclamation 97-22 states that scanned receipts are acceptable as long as they meet specific guidelines. Those guidelines are relatively straightforward. The scanned copy must be identical to and contain all the accurate information that was in the original document. With today’s technology that has become a simple task. From smartphone camera apps to designated stand-alone scanners, creating clear picture-perfect images of receipts and invoices is a relatively fast and painless process.
The second question is “How can I tie these scanned documents to my record-keeping software, such as a Quicken or QuickBooks record?” Intuit has made that process reasonably easy as well. With a smartphone-entered transaction there will be a camera icon that will upload the picture and attach it to the transaction. With a computer, there are a few more steps. The first step is saving the digital copy of the receipt to your computer. There are a few ways to go about the process. As you are entering a transaction, you will probably notice a paper clip below the date. That is the first way. The second way is to right-click on the transaction line, then mouse over to attachments. The third method for tying a scanned file to a record is by using the cog icon on the right side of the record screen, then mouse over to attachments. All three methods will bring up a menu that will have an “Add” button with options asking where to get the document image to attach to the transaction. Once you have added the documents, click "Done." The paper clip below the date will now show continually with that transaction. Click on the paperclip and the document image will pop up.
The third question often asked is “What should be done with the paper originals?” That is a question you will have to answer for yourself. Some individuals feel more comfortable with keeping the physical paper copy within reach. Others will shred the paper copy once scanned. Neither method is wrong. The only recommendation is to make sure you are backing up that digital information regularly. Online cloud storage, thumb drives, CDs ― it does not matter which you use just as long as you feel secure that if the computer crashes, you have a backup.
To create a back-up, you need to back up the actual attached documents folder on your computer. The software backup does not include attached documents.
Hopefully, this provides a valuable solution to an age-old problem of storage and accessibility. Heck, some might even find this process a little fun. Your accountant will love having digital records it if they do Client Data Reviews with you, and just maybe you can start using that freed up floor space for something enjoyable.